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Beyond Signaling and Human Capital: Education and the Revelation of Ability

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Listed:
  • Peter Arcidiacono
  • Patrick Bayer
  • Aurel Hizmo

Abstract

We provide evidence that college graduation plays a direct role in revealing ability to the labor market. Using the NLSY79, our results suggest that ability is observed nearly perfectly for college graduates, but is revealed to the labor market more gradually for high school graduates. Consequently, from the beginning of their careers, college graduates are paid in accordance with their own ability, while the wages of high school graduates are initially unrelated to their own ability. This view of ability revelation in the labor market has considerable power in explaining racial differences in wages, education, and returns to ability. (JEL D82, I21, I23, J24, J31)

Suggested Citation

  • Peter Arcidiacono & Patrick Bayer & Aurel Hizmo, 2010. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 76-104, October.
    • Handle: RePEc:aea:aejapp:v:2:y:2010:i:4:p:76-104
    Note: DOI: 10.1257/app.2.4.76
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    References listed on IDEAS

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    12. Peter Arcidiacono & Patrick Bayer & Aurel Hizmo, 2010. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 76-104, October.
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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